Question

1. Glencoe Medical Clinic operates a cardiology care unit and a maternity care unit. Colby Hepworth, the clinic’s administrator, is investigating the charges assigned to cardiology patients. Currently, all cardiology patients are charged the same rate per patient day for daily care services. Daily care services are broadly defined as occupancy, feeding, and nursing care. A recent study, however, revealed several interesting outcomes. First, the demands patients place on daily care services vary with the severity of the case being treated. Second, the occupancy activity is a combination of two activities: lodging and use of monitoring equipment. Since some patients require more monitoring than others, these activities should be separated. Third, the daily rate should reflect the difference in demands resulting from differences in patient type. Separating the occupancy activity into two separate activities also required the determination of the cost of each activity. Determining the costs of the monitoring activity was fairly easy because its costs were directly traceable. Lodging costs, however, are shared by two activities: lodging cardiology patients and lodging maternity care patients. The total lodging costs for the two activities were $5,708,000 per year and consisted of such items as building depreciation, building maintenance, and building utilities. The cardiology floor and the maternity floor each occupy 21,700 square feet. Hepworth determined that lodging costs would be assigned to each unit based on square feet.

   To compute a daily rate that reflected the difference in demands, patients were placed in three categories according to illness severity, and the following annual data were collected:

   Activity	Cost of Activity	Activity Driver	Quantity
   Lodging	$ 632,200	Patient days	21,800
   Monitoring	2,001,290	Monitoring hours used	29,870
   Feeding	436,000	Patient days	21,800
   Nursing care	5,195,700	Nursing hours	225,900
   Total	8,265,190

   The demands associated with patient severity are also provided:

   Severity	Patient Days	Monitoring Hours	Nursing Hours
   High	7,290	14,990	136,700
   Medium	11,270	11,580	74,600
   Low	3,240	3,300	14,600

   Required:

   1. Suppose that the costs of daily care are assigned using only patient days as the activity driver (which is also the measure of output). Compute the daily rate using this unit-based approach of cost assignment. If required, round your answer to the nearest cent.
   $ per day

   2. Compute activity rates using the given activity drivers (combine activities with the same driver). If required, round your answers to the nearest cent.

   Rate 1	$ per patient day
   Rate 2	$ per monitoring hour
   Rate 3	$ per hour of nursing care

   3. Compute the charge per patient day for each patient type using the activity rates from Requirement 2 and the demands on each activity. Round your interim calculations and final answers to the nearest cent.

   High severity	$ per patient day
   Medium severity	$ per patient day
   Low severity	$ per patient day

Answer 1

Answer PageNo D) The Daily rate using unit başed Approach only Patient days as Activity. Duiven - Total cost Total patient Days $ 8,265,190 $ 21800 = $ 379.13 = $ 319.13 peor day! 2) Calueclation of Activity Rates Activity Quantity . Activity Rate Activity Activity costA) Driver - (ALB) = 1068200 Loading and Feeding 1068200 Patient Days 21800 a 1800 1-$49 Pes Patientsby Monitorina 12,001,2901 Monitoring 29870 hourl 1829810 = 2001,290 based 29840 Per Honitorm =$61 hourleled = 5,195,700 225.900 Nursing Nursing Care 5,195,400 225,900 15,100 Howrs 1 - Per nearlina 1023 hour

Page No@ D Calectation of charge peor patient day of High ſeverity calley Activity Loading and Feeding Monitoring Allocated cost Activity used) Activity Ratel@ GAXB) 7,290 354210 14,990 $67 1004330 136,400 3144100 4505640 Nursing Care Total cost allocated Patient days charge perpatient 7290 $618,05 Caluclation of charge per Patient day of Medium Severity Allocated Activity Actiwity uled(a) Activity Rate() CAXB) Loading and T 11,270 $uq Feeding 552230 Monitoring 11,580 775860 Nursing care 74,600 1715800 564 Total cost 3043890 allocated 16,270 Patient days Charge per I Pattend day $270.08

Page No ③ Colucation of charge per patient day of low severity Allocated close Activity action ask them All (AXB) Loading and I 8240 $49 168+60 Feeding Monitorinal 3,300 $64 221100 Nersing care 14,600 $ 23 335800 Total cost #15660 allocated Patient day 3240 Charge per $220.88 1 Patight day!